Service area is a region that is serviced by a facility in providing various services to customers in that area. Examples of a facility may include but are not limited to distribution centers, manufacturing plants, retail stores and service centers such as repair centers, etc. Examples of services may include but are not limited to transportation, delivery and repair. Service area can also be defined according to different service levels such as one-day delivery area, two-days delivery areas, etc. Service area is used for supply chain network design, facility selection/sizing, sourcing decision, service level management, etc.
A known technique determines service areas deterministically based on distance or transit time shown by the radial diagram in FIG. 4. For example, 410 may represent a distance (for example, 400 miles) that can be reached by a service provider from a facility to customers, for instance, in 2 days. 411 may represent a distance that can be reached by the service provider from a facility to customer in 1 day, for example, 200 miles. Black small circle (402) at the center may represent a facility, and the grey and white circles (e.g., 414 and 415 respectively) may represent customers located with respect to the location of the facility (402). Using 200 miles as a radius, a circle (413) can be drawn, and any customers within the circle can be determined as customers who can be serviced in one day. In the same fashion, another circle (412) can be drawn, and any customers within this circle (412) but outside of the circle (413) can be considered as customers who can be serviced in two days.
However, this traditional method may be inaccurate, for example, in that it ignores stochastic factors such as order processing lead time, supply lead time, transit time variability, resource availability variability, and other factors such as customer requirement and supply chain polices. For example, a customer may be located 150 miles (which is within one day service area according to the FIG. 4) away from the facility, but the product that needs to be delivered to the customer may take long time to package, require special component that needs to be acquired from other supplier, and the customer may be located in mountain area which takes long time to reach, etc. In this case, it may take 3 days, rather than one day, to deliver the product to the customer after the order is received.
Inaccurate determination of service areas negatively impacts customer services, inventory and costs, revenue, profit, and efficiency of supply chain. Thus, it is desirable to have a method and system that can more accurately determine a service area. For example, the known method in the above example would determine the delivery time to be within 1 day, when it would actually take 3 days. When the customer places an order, the customer would be told that the good will be delivered in one day. Failing to fulfill this promise may cause customer dissatisfaction.